How Much Will Indianapolis Lose From Butler?
Published: Monday, 29 Mar 2010 | 11:58 AM ET
By: Darren Rovell
CNBC Sports Business Reporter
It’s the feel good story of the tournament: The little guys from Butler playing in their hometown of Indianapolis in the Final Four.
Gordon Hayward #20 of the Butler Bulldogs puts up a shot over Luis Colon #15 of the Kansas State Wildcats during the west regional final of the 2010 NCAA men's basketball tournament.
But Butler being in the tournament means it takes a spot from another team that could travel from farther away, fly in, stay in more hotel rooms and spend more at restaurants.
Let’s start with the original estimate by city officials: $50 million. That’s how much they claim will come in visitor’s spending from the Final Four.
That number is always suspect because officials in their estimates usually don’t displace how much revenue is made during those days during normal times. The number $50 million might be accurate, but it’s only valuable when put into context of how much Indianapolis pulls in over a similar period of time.
Assuming the $50 million number is a gross and not net number, sports economist Brad Humphreys thinks that nearby Butler’s inclusion in the Final Four means a 25 percent dip -– or a $12.5 million gross impact.
“Any net economic impact from the Final Four comes from export tourism,” said Brad Humphreys, who teaches at the University of Alberta. “That’s the money spent from visitors on outside Indianapolis, who would not have otherwise visited the city.”
Victor Matheson, professor of economics at the College of the Holy Cross, who has studied sports business extensively, agrees with Humphreys’ assessment.
“Some will say that Indianapolis residents will come into town more and spend money at bars and restaurants during the game and they wouldn’t have necessarily done that if Butler weren’t in it,” Matheson said.
But Matheson, who suspects the net economic impact to Indianapolis is at most $30 million, says that anyone who takes these numbers seriously always subtract what locals spend in their home towns during special events like the Final Four, reasoning that the $50 or so they spend in a particular bar, they won’t spend at another time. So it all balances out.
The Kansas State fan who would have come into town if Butler hadn’t defeated them, would have spent money at a bar and restaurant that he or she would have never gone to before had the fan not been in town, Matheson says.
Coming into town to see the game won’t have the same appeal that it did a year ago when Michigan State played in the Final Four in Detroit.
“The Butler campus is literally seven miles away from the city,” said Mark Rosentraub, a professor of sport management at the University of Michigan. “East Lansing wasn’t Detroit, so it was a road trip for many of them."
Rosentraub says Butler’s appearance might help boost Indianapolis in other ways. “It could increase applications, which could lead to a better quality of student and, in the long run, that helps out Indianapolis,” he said.
There are some economists who play down Butler’s hometown discount. Sports economist Andrew Zimbalist said Butler’s inclusion won’t have an “appreciable impact.”
Larry DeGaris, an associate professor of marketing at the University of Indianapolis, doesn’t buy that there can be that much of a loss because the Final Four is so corporate.
“Sure there are fans that come here, but this is for corporate America,” DeGaris said. “And whether Butler is playing or not, they’re here. I guarantee you, you can’t find a bag of cocktail shrimp in town.”